McCullough: I Want You To Focus On 'Full Cycle Investing'

Keith McCullough: Point number three this morning is the Russell 2000. You do not buy the Russell 2000 as we go back to Quad 4 (i.e. an environment of U.S. growth and inflation slowing) in Q3. Q3 is about to start. And people are complaining, ‘But my Quad 4 assets didn’t work yesterday.’

If you get back into the sob story that this is not working today you’re going to miss the bigger move. We’re the only firm that caught the turn from September to the December lows after having been bullish on the Russell 2000 for two years prior. And, the Russell is still down -11% from that September peak.

What I want you to focus on is what I call ‘Full Cycle Investing.’

Where are you on the sine curve dear Sirs and Madams? If you understand that you’re not afraid to short the Russell yesterday on green. A guy on CNBC said yesterday, ‘You’d have to be an idiot to short the market yesterday.’ So I shorted it. I didn’t short it because of him. I’m happy to short the Russell, High Beta, Financials. They’re all the same thing when you’re going down the backside of the sine curve.

Just so that you understand this, when growth is accelerating, you’re going up the sine curve and at the peak, you get out of growth exposures, in particular your Quad 4 exposures. And then the cycle ends somewhere down the bottom of the growth curve.

Everyone wants the cycle to end early because they need it to end. Remember, you’re only getting Fed cowbell because you’ve seen the first part of growth slowing. Now everyone is saying ‘Buy stocks no matter how much the company misses earnings by.’ The Fed is their backstop.

But this narrative is going to be really interesting to watch, particularly if the Fed isn’t dovish enough today. Is the Fed really going to go whole hog dovish within 0.9% of the all-time high in the S&P 500? That wouldn’t make Powell look politicized, would it? Private Equity Powell, PE Powell.